Adobe hitches long-term wagon to Flash, Apollo

While Adobe's 2007 financial standing is likely to improve courtesy of the latest Creative Suite product cycle and its new version of Photoshop, management is looking to Flash and its Apollo platform to keep the momentum going in 2008.

While Adobe's 2007 financial standing is likely to improve courtesy of the latest Creative Suite product cycle and its new version of Photoshop, management is looking to Flash and its Apollo platform to keep the momentum going in 2008.

On Adobe's earnings conference call Thursday night--Acrobat 8 helped the company to report fiscal fourth quarter earnings of $182 million, or 30 cents a share, on revenue of $682 million--here's what management had to say:

Flash: Chief Operating Officer Shantanu Narayen said the Flash player is nearly on every desktop and the company is "seeing the same kind of adoption on alternate devices." As for monetizing Flash, Narayen said video can lead to Flash profits as will mobile device usage. CEO Bruce Chizen noted that Adobe "will continue to look for ways of monetizing the Flash clients in non-PC devices. For example, both the Sony PlayStation 3 and new Nintendo Wii, currently include the Flash player in which get a royalty on both. And, of course, we will continue to sell FlashCast like service to the carriers to take advantage of those non-PC devices. And ultimately, we will be able to do the same for both set-top device manufacturers and cable providers."

Apollo: Narayen said that Apollo is revving up in 2007. "The things that you might expect from Adobe this year is more of a public beta of an Apollo client runtime, which enables people to create new applications," said Narayen. "We certainly started showing that with MAX, and we showed some really interesting applications like the eBay application that was built on top of Apollo. The other thing you've seen us do this year already to position Apollo for the next generation of web applications is to partner with Mozilla on the ActionScript VM engine, so that we can have both web developers, as well as Flash developers standardize on an open standard which will enable more cross-platform playback."

Chizen told analysts to think about Apollo the same way they would characterize Adobe Reader or Flash Player, its a client that can be used to help others build unique applications and allow Adobe to sell more tools.

Pacific Crest analyst Steve Lidberg said in a research note that the Flash ecosystem "continues to flourish with an ever-increasing number of Flash-enabled devices enteringthe marketplace, such as the PlayStation 3 and the Wii. Flash continues to be a de facto standard for video playback on the Web, and Adobe has the opportunity to further solidify this status and potentially strengthen the presence of Flash on mobile handsets."

As for Apollo, Lidberg noted Adobe's next-generation Web-rich media platform will be developed through 2007 and could gain traction in 2008 as a preferred way to develop applications. "This remains in early stages, but it appears that Adobe is becoming increasingly public in its product development efforts, which could prove positive as the company seeks to retain and increase engagement with its client base," said Lidberg.

Add it up and Adobe becomes an online advertising play in many respects--its applications are behind much the Web's ads. As online advertising incorporates more graphics, video and interactivity, Adobe stands to gain.

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